Aussie targets non-mortgage business

Aussie Home Loans
will make a bigger push into the insurance market as it looks to grow after the competition watchdog approved a takeover by
Commonwealth Bank of Australia
.

The home loan broker’s executive chairman,
John Symond
, told The Australian Financial Review that Aussie would partner with an insurance provider this week as part of a bigger drive into the sector, but insisted it would not be CBA-owned CommInsure.

“We get 13,000 new customers each month wanting to see someone. We know if they buy a house, they are going to have to go and insure it and we know they are going to need other products like credit cards," Mr Symond said.

“We know that they are going to need products but we never had the processes or the resources to do that, so it is a lot of customers going to waste.

“Now, CommBank can see there is going to be an opportunity for them to get the odd product in, but it is going to have to be ‘best of breed’."

CBA agreed in December to pay around $270 million to increase its one-third stake in Aussie to 80 per cent, with a right to acquire the remaining 20 per cent in 2016, but the deal needed the approval of the Australian Competition and Consumer Commission.

The ACCC gave the green light last week, despite acknowledging that it would reduce competition in the home loan market and that Aussie was likely to sell more products financed by CBA.

“We assessed this deal with the assumption that the Commonwealth would have influence over Aussie," ACCC chairman
Rod Sims
said.

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“I think it would be naïve to think differently, but even with that assumption, we didn’t feel it substantially lessened competition. It certainly lessens competition, but it doesn’t meet the hurdle we must apply of substantial lessening of competition."

Aussie already offers mortgage, home, car and life insurance to its customers and has an existing relationship with the Hollard Insurance group.

But the area has not been a major focus for Aussie and Mr Symond said he wanted to “crank up" its business outside of the home loan market.

He said the insurance products offered by CommInsure “wouldn’t suit us".

“We will be appointing a new insurance partner, and it is not CommInsure, it is a different crowd. We will want to continue to do business with a whole range of financial institutions, including the big banks, in terms of acting as a broker for mortgages predominantly, but also other products down the line," he said.

“We want to expand our non-mortgage products. We have had a successful credit card for some years now. But we want to get more aggressive in the non-mortgage products."

Meanwhile, rival lenders have called on Aussie to prominently disclose the fact that it is owned by CBA in its advertising material once the takeover is complete.

“There is growing concern that the major banks are creating a veneer of competition through their ownership of various sub-brands, such as Aussie Home Loans," said
Damien Walsh
, the managing director of mutual bank
bankmecu
.

“We believe this significantly impacts on the ability of consumers to make informed decisions about their banking."

Mr Symond, who founded Aussie as a challenger to the major banks in the 1990s, will remain as executive chairman of the group until at least 2016 under the terms of the CBA takeover.